Slater, who swims with one arm after suffering nerve damage, set a European record of one minute 05.73 seconds.
But 15-year-old Elliott, who has cerebral palsy, clocked 1:05.32.
"It's my first time competing internationally in freestyle so I am so happy," Slater, 23, told BBC Sport.
"That was an amazing swim by Steph Slater. I didn't think she would be so close to Maddison. Steph pushed her all the way and it was fantastic to see."
"It has been hard to transition from swimming with two arms to one but I've been working hard and it is paying off.
"Next time it will be my turn to break the world record."
Elliott, the youngest Australian to win a gold medal at London 2012, beat the previous world record of 1:05.73 set by American Jessica Long.
Slater and Elliott will meet again at next year's IPC Swimming World Championships in Glasgow
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